Financially, home buyers looking to move-up have a much easier time than first-timers, who are trying to scrape up enough cash to cover a down payment and closing costs. But trade-up buyers face a whole new complication: Buy first or sell first?
Buy First
This strategy makes the most sense if you're in a hot market where homes are going fast and you can buy with cash or you're in a quiet market where sellers don't have many choices and will be anxious to accommodate you, say, if you want to make your purchase offer contingent on the sale of your previous home.
If you decide to rent out your old house, most lenders will consider up to 75% of rent payments as income, as long as you have a signed lease.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Sell First
Why not just make your offer to buy a new home contingent on selling your old one? Because if sellers receive multiple offers, they won't even consider yours. They won't want to waste their time on an offer that may fall through.
Real estate agents prefer that you sell first and put off serious shopping until after you've accepted an offer on your current home. That's safer for them: They don't want to waste their time nor risk loss of commission check.
Trouble is, if you've already agreed to vacate your home in 60 days, you could feel tremendous pressure to settle for a house that falls short of your ideal. And if the sellers of the house you want know you need to find a home quickly, it can be all that much harder to negotiate a good price.
If you sell first, you can take some of the heat off by negotiating better terms for your home sale.
Aim for a longer period until closing -- say, 90 days instead of 60 -- or ask the buyers if they would consider a short-term rent-back to you for another month or two after closing. (They may agree to your terms if it's a seller's market or they really want your home). Offer a security deposit -- say, a couple of thousand dollars -- and a daily rent that covers their new mortgage costs. Both parties should check with their homeowners insurance company to make sure their homes and possessions are covered during a temporary rent-back.
-
Why So Many Men are Bad at RetirementOlder men today came of age amid the social upheavals of the 1960s and ’70s, but their formative years were deeply planted in the traditional world of segregation and sexual stereotyping.
-
Hot Tips for Home Buyers and Sellers Right NowReal estate looks to be especially hopping this spring, thanks to pent-up demand and buyers adjusting to higher mortgage rates. Here’s how you can prepare.
-
Commercial Real Estate Outlook 2024: The Kiplinger LetterThe Kiplinger Letter In 2024, expect hybrid and work-from-home trends, tighter budgets, rising rents and the demand for data centers to continue.
-
Delinquent CRE Loans Are on the Rise: The Kiplinger LetterThe Kiplinger Letter Banks are expanding their efforts to restructure CRE loans to avoid losses from the commercial real estate sector.
-
As Mortgage Rates Rise, Renting Is Now Cheaper Than Buying for Many: The Kiplinger Letter
The Kiplinger Letter A jump in mortgage rates has caused housing affordability to slump and priced many first-time home buyers out of the market.
-
Rental Market Will Slow Through 2023: The Kiplinger LetterThe Kiplinger Letter Expected growth in the rental market is likely to remain slow for the rest of the year amid a slow housing market and cooling economy.
-
Selling Your Home? Set the Right Pricereal estate If you're selling your home, setting the right price is crucial. Don't overprice or you'll scare away prospective buyers.
-
WFH Impact on Commercial Real Estate Market: Kiplinger Economic ForecastsEconomic Forecasts Commercial real estate continues to struggle. Office vacancies hit 18.9% in the second quarter of 2023.
-
Greenland, U.S. Plans to Boost Tourist Economy: Kiplinger Economic ForecastsEconomic Forecasts A U.S. congressional effort could see some Canadian visitors get longer stays, meanwhile, Greenland bids to be the next vacation hotspot.
-
China’s Economy Weakened by Low House Prices and Falling Exports: Kiplinger Economic ForecastsEconomic Forecasts China’s economy lost momentum in May due in part to fewer exports and declining housing prices, but the country’s fast fashion retailers are booming.
